Kim Jong Eisner

Why Disney is like North Korea.

When last we checked in on Michael Eisner six months ago, the Disney boss was losing a war on three fronts. Eisner was fending off a hostile bid from Comcast, suppressing a shareholder revolt, and trying to explain why the performance of many Disney units was less than magical. His job security seemed tenuous, at best. In February, when Comcast had formally proposed to acquire Disney, the stock shot up from $24.08 to $27.60. Clearly, investors relished the potential of the company’s assets in the hands of someone other than the longtime CEO.

The hostile bid, which Comcast abandoned in late April, coincided with an anti-Eisner proxy campaign led by dissident shareholder Roy Disney. Together, these two efforts spurred Eisner and the Disney board to at least pretend to address a series of problems with corporate governance, succession, the mishandling of key relationships, and poor performance at crucial units. So, the past six months have seen a flurry of activity with a net result of: practically nothing. Disney has hardly changed at all. And as it gradually dawned on investors that Eisner wouldn’t be leaving anytime soon, they began to push Disney’s stock below the pre-takeover bid levels. Indeed, over the past six months, the stock, which closed today at $22.40, has underperformed not only Comcast and the S&P 500, but also the parent companies of its network rivals: General Electric (NBC), Viacom (CBS), and News Corp (Fox).

Shareholder activists had long complained that Eisner ruled with an iron fist, acting as both chairman of the board of directors and CEO. In March, Disney agreed to separate the two posts and named former Senate Majority Leader George Mitchell as the new chairman. But as chairman, Mitchell has acted more like a senator than a president, leaving Eisner with essentially unlimited authority.

Eisner had also been criticized for steadfastly refusing to name a successor, despite his 23-year tenure and a history of heart trouble. In the past several months, Disney’s board has made a lot of noise about succession planning, establishing a process and institutionalizing board discussions on the topic. But they don’t seem to be casting a very wide net. Speculation seems to center entirely on Disney President and Chief Operating Officer Bob Iger, an obvious but not particularly inspiring candidate. Iger has been largely responsible for one of Disney’s main failures in recent years—the ABC network’s perennial third-place status.

Disney’s movie business has also been a bust recently. Each of Disney’s three surefire summer blockbusters—The Alamo, King Arthur, and Around the World in 80 Days—bombed. The big hit to emerge from a Disney unit this summer was Fahrenheit 9/11, initially produced by Miramax. Of course, Eisner famously decided to bar Miramax from releasing the film on its own and then offered to donate any of Disney’s Fahrenheit 9/11 profits to charity.

Disney has been languishing in other areas, too. It hasn’t managed to sell its money-losing Disney retail stores. (Earlier this month, it was reported that Children’s Place has a “nonbinding letter of intent” to buy the chain, but no deal has been struck.) And while Eisner has publicly stated that he wants to patch things up with Pixar, the animation studio that has produced Disney-distributed hits like Finding Nemo, there’s no sign of progress on that front either.

The hostile bid and shareholder revolt seemed to have lit a spark under Eisner and a board that had been sleeping like Snow White. But six months on, Eisner’s Magic Kingdom still looks like North Korea, a struggling, insular dictatorship.